BETHESDA, MD-At the beginning of the month Mortgage Bankers Association proposed breaking up Fannie Mae and Freddie Mac into regional entities – a move that, it hardly needs to be said, would have major ramifications for multifamily finance. Problem for the industry is that it is unclear exactly what those ramifications will be – and how likely it is the realignment will occur in the first place. There were rumors this summer that the Obama Administration was considering a break up of the GSE. The proposal from MBA, though, does not appear to have the support – or overt disapproval for that matter – by the government.

To make better sense of the current financial and political environment, we turn to the CEO of one of the largest agency lenders, Walker & Dunlop’s William Walker.

GlobeSt.com: Let’s start at the beginning. This week was the one year anniversary of the government taking Fannie and Freddie into conservatorship. How has that affected multifamily finance?

Walker: Essentially it’s been business as usual. That’s relative of course. Certainly their underwriting standards have gotten tighter and tougher and the amount of business up for pre-review has increased significantly. There have been staffing issues. Compare, though, that with other sources of capital and the level and depth of changes we’ve seen with them. Pension funds, life insurance companies, banks – they’ve all changed so dramatically that what has happened at Fannie and Freddie is nothing.

GlobeSt.com: But the status quo right now is only temporary. Sooner or later the government is going to have to do something with them, especially as they keep registering losses.

Walker: Yes, that’s true and I can’t predict the direction in which they will go, as much as I would like to.

GlobeSt.com: The MBA proposal?

Walker: It’s an interesting one—basically it calls for breaking up Fannie and Freddie and creative regional banks with a definitive government guarantee. That approach does hold some merit – consider what happened with the Baby Bells in the telecom space when the government broke up AT&T. But how that will translate with Fannie and Freddie is unclear, at least for multifamily finance.

GlobeSt.com: There are also suggestions circulating that Fannie and Freddie’s multifamily business should be spun off. What do you think of that?

Walker: Multifamily finance is not so big that it can be spun off – it is between 10% to 20% of their business. Also, there is case for keeping it in house: it has been profitable for the government.

GlobeSt.com: Do you think the Obama Administration has a plan for Fannie and Freddie – that is, at least a plan that it will unveil in the short term?

Walker: I would doubt it if only because Fannie and Freddie are still working for the housing space – and the one thing the government doesn’t want to do right now is tinker with something that is working, especially with everything else on its plate. Remember at the end of the day Congress makes the final decision about the GSEs and we have not heard anything from the key players, Barney Frank, Chris Dodd, on their thoughts about Fannie and Freddie.